Emily Cheney Is Evaluating a Proposal to Extend Credit to a Group

question 14

Multiple Choice

Emily Cheney is evaluating a proposal to extend credit to a group of new customers.The new customers will generate an average of $40,000 per day in new sales.On average,they will pay in 68 days.The variable cost ratio is 80%,collection expenses are 2% of sales,and the cost of capital is 10%.What is the NPV of one day's sales if Emily grants credit? Assume that there is no bad debt loss.

• A)$4,226.81
• B)$5,190.78
• C)$6,483.06
• D)$7,200.00

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Definitions:

Refining Strategy

The process of making improvements or adjustments to a strategy with the goal of enhancing its effectiveness or efficiency in achieving defined objectives.

Birth Stage

The initial phase of an organization or product's life cycle characterized by development and early growth.

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Businesses characterized by innovative practices and strategies, often focusing on market disruption and rapid growth.

Finances

The management of large amounts of money, especially by governments or large companies, including acquiring, investing, and managing funds.